Gold prices have started to slip after reaching a daily high of $2,666 on Monday, as China’s stimulus efforts have failed to ease deflationary pressures in the financial markets. The strong US Dollar has also contributed to the decline, with the XAU/USD trading at $2,650, down 0.26% at the moment.
Over the weekend, it was reported that China is facing deflationary pressure that could hinder its goal of achieving a 5% Gross Domestic Product (GDP) growth. In response to this, China’s Finance Minister Lan Foan announced plans to continue providing stimulus, supporting the property market, and replenishing state bank capital to boost the country’s economy.
Despite the US bond market being closed for Columbus Day, Bullion prices have slipped due to the strength of the dollar. The US Dollar Index (DXY) has edged up 0.38% to 103.30, its highest level since early August 2024.
Minneapolis Fed President Neel Kashkari’s comments on modest rate cuts and a strong labor market have further supported the Greenback. He mentioned that the recent jobs data indicates a strong labor market and that the economy is bringing inflation back to 2%.
Geopolitical tensions, such as Israel’s response to Hezbollah and Iran, continue to impact Gold prices, with traders keeping an eye on US economic data to be released later in the week. Newswires have reported that Israel has initiated security meetings to decide its reaction to attacks in Tel Aviv by Iran and Hezbollah.
US economic data scheduled for the week includes the New York Empire State Manufacturing Index on Tuesday and the Balance of Trade on Wednesday. Federal Reserve (Fed) members are also expected to speak throughout the week, which could provide further clarity on future monetary policy decisions.
In terms of technical analysis, despite some selling pressure, the Gold price uptrend remains intact, with momentum still bullish. If XAU/USD falls below $2,650, it could see further downside with a key support level at $2,600. On the other hand, clearing the October 4 high at $2,670 could open the path for a challenge to the year-to-date high of $2,685.
Overall, Gold has historically played a significant role in human history, serving as a store of value and medium of exchange. Central banks, especially those from emerging economies, have been increasing their Gold reserves to diversify and strengthen their currencies. Gold’s inverse correlation with the US Dollar and US Treasuries, along with its status as a safe-haven asset, make it a popular investment choice during turbulent times. The price of Gold can move due to a variety of factors, including geopolitical instability, economic data, and currency fluctuations.
